Why CIOs Should Care About Supply Chains, Procurement

Recent research shows that companies plan to adopt or expand the use of analytics tools in supply chain management, suggesting that CIOs and other IT leaders would do well to include supply chain and procurement leaders in their plans.

The survey, by Bloomberg Businessweek Research Services and SAP, found that out of more than 300 executives surveyed, 73 percent say supply chain analytics tools are important to meet their company goals, with 71 percent saying these tools need to be more predictive.

I admit, this is not an area I knew a lot about a year ago. But in the past year, I’ve been writing for B2B.com, a vendor-neutral site owned by Software AG. It has been interesting to see how supply chains are adopting tools and technologies that you might typically think of as belonging to IT or, at least, the executive suite.

But it makes sense. After all, operations, procurement, the supply chain — this is where business decisions and data become concrete. This is literally and figuratively where the rubber meets the road.

What’s surprising, though, is how little insight companies tend to have into these functions. For instance, a recent survey by KPMG and the Economist found that four out of every 100 companies have little to no understanding of their immediate suppliers and how they operate. Only 49 percent had some visibility into that same group, but no visibility into what are called tier 2 and beyond suppliers — which is to say, their supplier’s business partners and suppliers.

No wonder companies want to invest in real-time analytics for supply chains.

“A real-time supply chain can sense and detect new challenges as they happen,” Andres Botero of SAP Transportation Management writes. “That enables supply chain planners and practitioners to make real-time decisions based on the most up-to-date information. Companies taking this approach view the supply chain as a strategic initiative. They use their understanding of the market and fluctuating demand patterns to adjust their supply plans in real time.”

But most companies have a long, long way to go before they can achieve that kind of real-time decision making, I’ve learned. For instance, many suppliers still use paper invoices. Even in companies where B2B processes are more automated, few organizations really take advantage of that data by pulling it out for analysis, according to Navdeep Sidhu, an integration expert, former Deloitte consultant and director of Product Marketing at Software AG.

Sidhu oversees B2B.com, so we’ve had many a long discussion about the technology challenges facing supply chain managers. He calls B2B systems the “black box” of the enterprise. Many companies are afraid to look into the black box because of the complexities of B2B systems, he says, adding nobody does so until an accident happens.

To achieve real-time analytics, companies will need to change that by opening the black box silo and integrating the data with other enterprise systems. Of course, this is the sweet spot for middleware companies like Software AG, whose solutions can open up that data.

This is something enterprise technology journalists typically have not covered because B2B systems have operated in a silo, separated both by technology and by responsibility from other enterprise systems.

But the focus on predictive analytics should change that. Middleware vendors are adjusting as well, coupling B2B with a broader base of data capabilities, as well as supporting mobile and offering cloud-based services.

Companies will have to do more than make supply chain data accessible if they want to make this data useful: As with any other analytics project, data quality and governance will be essential to ensuring that data is meaningful and useful, particularly when you start to talk about real-time actions.

“Analytics -- or more specifically, analytics software -- won't be a quick fix in closing existing supply chain gaps,” warns Jennifer Baljko of EBN. “To do this right, companies have to invest a considerable amount of money and resources in developing an analytics foundation before they can even run the nifty algorithms embedded in the software.”

This is IT’s moment to shine as a strategic business enabler. CIOs and IT leaders should partner with supply chain leaders and procurement managers to open up those operations silos, clean up the data, and otherwise ensure supply chain analytics aren’t repeating the mistakes of past analytics projects.

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